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Good day, ladies and gentlemen. Welcome to TomTom's Second Quarter 2026 Results Conference Call. [Operator Instructions] Please note that this conference is being recorded. I will now turn the call over to your host for today's conference, Claudia Janssen, Investor Relations.

Thank you, operator. Good afternoon, everyone, and welcome to our conference call. On today's call, we will discuss the operational highlights and financial results for the second quarter and first half of 2026, together with Mike Schoofs and Taco Titulaer.

Mike will begin with an update on our strategic and operational developments, and Taco will then provide further insight into our financials. After their prepared remarks, we will open the line for your questions. And as always, please note the safe harbor applies.

With that, Mike, let me hand it over to you.

Thank you, Claudia, and good afternoon, everyone, and thank you for joining our call. I'll give you an update on our strategic and operational progress for the quarter before handing over later to Taco for the financials.

So during the quarter, we continued to make progress across both Automotive and Enterprise, strengthening our positioning and our position as a provider of high-quality scalable location technology.

So in Automotive, we see investments into automated driving, where we act as a critical safety component in a growing industry. We're engaging globally with key players in the ecosystem and with the OEMs, so both. And our location data and our dynamic services like traffic speeds and hazards play a key role to get to zero accidents together and less disengagements of the automated driving systems. And quality and freshness at scale for our data are clear differentiators in those conversations.

In Enterprise, we continue to broaden our customer base and expand the range of use cases we support. So growth across more customers with new logos is helping us to further diversify our revenue base and reducing customer concentration, which is quite important and a good trend. So we see the need for high-quality continuously updated location data that can be seamlessly consumed by AI systems.

And to support this as an example, we introduced the TomTom Agent Toolkit through Maps SDK, enabling developers to build AI-powered applications that interact more intelligently with maps and location data. And also a sharp focus from us on growth industries like government and defense, the public sector and geospatial analytics, of which insurtech is a big market, enables us to increase our opportunity pipeline in terms of new logos, but also the size of individual deals.

So overall, the progress we are making reflects disciplined execution, continued product innovation and strengthening commercial traction across our core markets.

Looking ahead, we remain focused on execution in '26 while positioning the company for future growth. And we see our customer programs expanding into 2027, especially in Automotive, notably through China overseas wins and a further rollout and expansion within the VW Group.

We see clear opportunities in Location Intelligence, which is predominantly Enterprise. Our data and dynamic services are the key components to increase adoption into workflows of our target industries. And making our data AI consumable also unlocks new use cases and expands our addressable market. We are confident that the steps we are taking today will support a return to revenue growth from '27 onwards and continued improvements in profitability over time.

And with that, I'll hand over to Taco, who will take you through the financial results in more detail.

Yes. Thank you, Mike. I'll cover our financial performance and our outlook, after which we'll take your questions. In the second quarter of 2026, group revenue was EUR 135 million, an 8% decrease from last year's EUR 146 million. Decline was in line with expectations and revenue remains on track for the full year.

Let me briefly break down our top line performance. Start with Automotive revenue. It came in at EUR 81 million for the quarter, a 6% decrease year-on-year. Automotive operational revenue was EUR 76 million, down 2% year-on-year. Excluding currency effects, revenue was more or less stable, with higher production volumes at certain customers offsetting the ramp down of some vehicle programs.

Enterprise revenue was EUR 38 million, down 4% year-on-year. On a constant currency basis, revenue was stable year-on-year. Taken together, our Location Technology segment generated EUR 119 million, which is 5% lower than last year.

Finally, the Consumer segment declined as expected. Consumer revenue was EUR 15 million, down 24% year-on-year, reflecting the continued contraction of the [ P&B ] market and also memory supply constraints.

Gross margin improved to 90%, up from 88% last year. This increase was driven by a higher proportion of high-margin Location Technology revenue in our mix. Operating expenses were EUR 113 million, a reduction of EUR 35 million compared with the same period last year.

Excluding the restructuring charge in the prior year, underlying operating expenses decreased, mainly reflecting lower personnel costs following the organizational realignment and one-off items in prior years. As a result, our operating result was EUR 9 million compared with a loss of EUR 20 million in the same quarter last year. Our operating margin was 6%, a sharp improvement year-on-year.

Free cash flow for the quarter was an outflow of EUR 8 million compared with an inflow of EUR [ 14 ] million last year. During the quarter, we completed our EUR 15 million share buyback program. We ended the quarter with a net cash position of EUR 234 million with no outstanding bank borrowings.

Then on to the outlook. We are on track for 2026. The revenue development is progressing as expected, and we're delivering improvements in profitability driven by strong gross margins and disciplined cost control.

Looking ahead, we are reiterating our full year 2026 outlook. We expect group revenue of EUR 495 million to EUR 555 million with Location Technology revenue of EUR 435 million to EUR 485 million and an operating margin of around 3% for the full year. As already mentioned by Mike, we see a path towards revenue growth next year for total revenue, excluding Consumer. We also expect a further strengthening of both our gross and operating margins.

And with that, we are ready to take your questions. Operator, please start the Q&A.

[Operator Instructions] We will take our first question and the question comes from the line of Andrew Hayman from Independent Mines.

Maybe to add just a broad question for Mike to start with since it's your first call. I mean there's clearly going to be considerable continuity at TomTom, given your appointment and the length of time you've been with the company. But I could imagine that there are some adjustments that you want to make. Is there anything you could outline on shifts that you're looking to implement within the company?

Yes. Thank you, Andrew, for that question. So as you say, we have -- we want to see continuity as well. We have a strong foundation with a backlog in both Automotive and Enterprise. But what I already said in my opening, you see strong, let's say, growth segments in industry in both automotive and location intelligence. And we want to concentrate also in those growth markets.

So if you look at automated driving, there's clearly investments happening from the industry and there's margin and value in those. And for us, we see a clear product market fit, and we have an edge there. So we're investing and we already have proof points with a strong deal with the VW Group. So we want to double down. That's an important topic. In order to do that, you need to make choices and to say that you go after those markets.

The other part -- and by the way, before I move to location intelligence and enterprise is also that you see a shift from purely navigation into automated driving where it gets visualized into the infotainment system of a car. So it's not just navigation anymore, it all comes together that technology, which is a very strong momentum where we want to play a key role. So that's quite important for us to have the right positioning with our data and our services.

Outside of Automotive, that location intelligence part is also fast growing, but it's a vast landscape. So also there, you need to pick your battles. And what we can see is with the whole shift of AI consumable data, the data is fuel, and it's very strong. And people look for fresh wide coverage, qualitative data with rich in features and attributes, and we have that. That's our fuel and our baseline.

Now we need to -- we're investing into making that AI consumable, which is accelerating the adoption in our existing segments, but also opening new use cases. And in order to grow there, you need to be more relevant in those industries with that interface you build on top of your data, which we're doing and also moving higher up the stack in terms of location analytics, making -- enabling decisions from your customers instead of just the pure raw data.

So there's a shift happening there, which we see in terms of how we invest in our product stack as well to accelerate in growth markets. And that's more the concentration where we see the landscape moving, where we see growth in the industry with high margin, strong value and a competitive edge. And we go more in those directions in terms of investment and concentrating go-to-market.

Okay. Interesting. And then you did specifically mention VW. I mean, obviously, in the news at the moment, there's a lot of news about cuts that they're planning to make. Are you seeing that impact you at all? Or are you finding that actually the potential business there is just as interesting because levels of automation look like they'll be higher than maybe you once thought?

So if you look at across the board in the car industry, there's a lot of turmoil in that industry, right? We see a lot of things happening because the big decisions on EV, software, AI, automated driving. So there's almost no exceptions there across the board globally.

And VW is one of them, arguably a little bit closer to our doorstep in Europe and maybe there's a lot of things going on. But what we see is that there is that requirement and that push across the globe to invest in automated driving capabilities of L2+ that's happening everywhere, right? So there's no slowing down there regardless of we also in the automotive industry and decisions they need to take.

We see those programs have high intensity and high pressure and they need to be delivered for competitiveness as well, especially what you see coming overseas from China. So all that to say, I don't see an impact. The solutions need to be driven to the market to be competitive across the board.

Sorry, were you going to add something?

Yes. So and we are working very closely with our partners to bring those solutions to the market. So that's not changing.

Okay. Okay. And then just specifically on this quarter, I mean, the free cash flow was quite soft. And you already said that for the year, free cash flow will be negative as you invest in lane level maps. But any detail on that would be helpful. I mean, will you -- what do you expect for the full year for free cash flow? Will there be some reversal from Q2?

I think for the full year, free cash flow will be negative -- will continue to be negative. I think that will gradually slow down, which you have seasonal patterns for working capital that we don't want to influence. That said, we are on track to reverse that trend for next year. But for this year, the free cash flow will continue to be negative.

Okay. And then one other number question. The operating expenses decreased EUR 10 million year-over-year if you strip out the restructuring. But there's also mention of a one-off reversal of previously capitalized contract costs booked in Q2 '25. Do you have any details on that, for example, the size of it? And why was it reversed?

Well, I need to look up what we exactly said last year during the Q2 press release of 2025, but it was certain the cost that we put on the balance sheet was reversed. It was a change of plan of the customers, and then we take those costs by the OpEx line. So that's a one-off that occurred 12 months ago.

[Operator Instructions] We will take our next question, and the question comes from the line of Marc Hesselink from ING.

I had a bit of connection issues in the beginning. So sorry if I missed something before. But the first thing I want to discuss is you're still saying that next year, we should see a growth year backed by your current backlog.

How do you see that trajectory? Is that something that we will see already in the second half of the year, some clear improvements in the trading conditions and then accelerating pace over the course of '27? Or are there any really step-changes into the next -- going into that growth trajectory because of new models coming online, new contracts getting ready, that kind of stuff?

Yes, it is the latter. So we expect revenue to start growing as of next year, not in the second...

Okay. That's clear. Then maybe zooming back a little bit on the operating expenses. I think you highlighted that in the second half of the year, there will be a little bit less capitalization. But in the first half of the year, clearly, you're running ahead of your guidance.

I mean, if you get to the real guidance, it means that you have close to zero margin in the second half of the year, operating margin. That seems also a bit harsh, looking at all the trends. Maybe all the moving parts into the second half relative to the first half to get to that 3% level.

Yes. So I expect that operating margin will continue to be positive, although maybe not the percentage that we saw in the previous quarter. So overall, indeed, we are very comfortable with the guidance of 3%, i.e., meaning that it might be a little bit higher than that. But the -- that said, the 6% will not be repeated in the second half of the year, also due to less capitalization.

Okay. And finally, on EVs, I mean, the narrative is changing a bit, maybe not yet really visible in the numbers yet. But if you have the discussion with your clients, I mean, do we expect to significantly see the proportion of EVs continue to rise into next year? And if that's the case, how positive would that be for you, given the typically higher attachment rates to EVs?

Yes. So it's -- I think we've seen in the industry over the past 24 months shifts in both directions, right, shifting upwards in terms of EV adoption and down. Also the latest developments geopolitically has had an influence over EV adoption with fuel prices.

But it's hard to really define a forecast and a pattern to say this is going to continue. We see the move into hybrids again, right? We see more different powertrains running in parallel, which complicates the landscape for carmakers.

I would say the most important development we're seeing is the acceleration in automated driving, which I said before. So there's clear investment choices that carmakers need to make on top of everything else next to EV. And that's where the value lies and the growth lies as well in the industry and where we want to play a key role, which we're already doing with our -- the big deal in the win with VW, but also expanding that with the ecosystem players in automated driving and with the carmakers across the globe. So that's a common denominator.

We are engaging quite deeply with our data and our dynamic services. And that's where you see that we expect adoption to increase and also value and value add in terms of services and solutions in the car combined -- and I may repeat myself now a bit, but you said the connectivity problems, combined also with what's happening from automated driving and what happens in the, let's say, deeper in the vehicle being translated into the infotainment system with visualization and rendering of those ADAS systems.

There's a lot of push and added value towards the end user experience of those technologies being adopted and coming together. And that's why I see the biggest movement in the industry right now.

[Operator Instructions]

There seems to be no additional questions. I want to thank you all for joining us today. Operator, you may now close the call.

Thank you. This concludes today's presentation. Thank you for participating. You may now disconnect.

Good day, ladies and gentlemen. Welcome to TomTom's First Quarter 2026 Results Conference Call. [Operator Instructions] Please note that this conference is being recorded.

I will now turn the call over to your host for today's conference, Claudia Janssen, Investor Relations. You may begin.

Yes. Thank you. Good afternoon, everyone, and welcome to our conference call. In today's call, we will discuss the Q1 2026 operational highlights and financial results with Harold Goddijn and Taco Titulaer. Harold will begin with an update on strategic developments. Taco will then provide further insight into our financials. After their prepared remarks, we will open the line for your questions. As always, please note that safe harbor applies.

With that, Harold, let me, for the last time, hand it over to you.

Yes. Thank you. Thank you very much, Claudia, and good afternoon, everyone. Thank you for joining us. I will start with a brief update on our strategic and operational progress, and then I'll hand over to Taco for the financials.

The first quarter of 2026 execution was solid. Profitability continued to improve. Our core Location Technology business, Automotive and Enterprise, both made good progress, while revenue trends reflect the transition we expected this year.

In Automotive, we see carmakers accelerating their software strategies and taking more control of the in-vehicle stack. And at the same time, the industry continues to move towards higher levels of automation. Our Lane Model Maps are becoming an important differentiator. We're building on that, working closely with OEMs to support advanced driver assistance and autonomous driving.

In Enterprise, we extended both our customer base and our use cases. We strengthened our position in traffic and traffic analytics through new partnerships, including AECOM, Kapsch TrafficCom and LOCUS. These partnerships extend our real-time traffic data into infrastructure planning, traffic management, location intelligence. They also underline the value customers place in quality and depth of our data and on TomTom as a trusted partner. Overall, we are confident in our progress. The steps we are taking, advancing our maps platform and building strategic partnerships position us well for 2026 and beyond.

Before I hand over, a few words on the leadership transition we announced in March. Following a structured succession process, Mike Schoofs has been appointed CEO in today's general meeting. Mike has been with TomTom for over 20 years and built our global commercial organization. He knows the company, he knows our customers, and he knows the market inside out. I'm confident he will lead the next phase of our strategy with clarity and momentum. As a co-founder, it's very satisfying to see TomTom move in this next chapter with strong leadership in place.

And with that, I'll hand over to Taco for the financials.

Thank you, Harold. Let me discuss the financials and after that, we can take your questions. In the first quarter of 2026, group revenue was EUR 129 million, an 8% decrease from last year's EUR 140 million. The decline was in line with the expectations and guidance we provided with our Q4 results.

Let me briefly break down our top line performance. Automotive IFRS revenue came in at EUR 76 million for the quarter. That's a 5% decrease compared with the same quarter last year. Automotive operational revenue was EUR 70 million, which is 16% lower year-on-year. The decrease in revenue related from the gradual discontinuation of certain customer programs, along with the effect of a stronger euro relative to the U.S. dollar.

Enterprise revenue was EUR 38 million, down 8% year-on-year. Adjusted for currency fluctuations, Enterprise revenue showed a slight increase year-on-year. Taken together, our Location Technology segment generated EUR 114 million in revenue, which is 6% lower than Q1 last year. On a constant currency basis, Location Technology revenue increased marginally.

The Consumer segment, as expected, declined versus prior year. Consumer revenue was EUR 15 million, down 21% year-on-year. Q1 2025 was EUR 19 million, reflecting the development of the portable navigation device market. Consumer now represents a smaller part of our total revenue.

Gross margin improved to 90% this quarter, up from 88% in Q1 last year. The 2 percentage point increase was driven by a higher proportion of high-margin Location Technology revenue in our revenue mix. Operating expenses were EUR 103 million, a reduction of EUR 15 million compared with the same quarter last year. The decrease is mainly the result of the organizational realignment we carried out last year, which lowered our cost base, combined with the higher capitalization of our investment in Lane Model Maps. As a result of higher gross margin and lower cost, our operating result was EUR 14 million for the quarter, a sharp improvement from EUR 6 million in Q1 last year. Our operating margin was 11%, up from 4% in the same quarter last year.

Finally, free cash flow for the quarter improved to a positive inflow of EUR 1 million when excluding restructuring payments compared to a EUR 3 million outflow in Q1 2025. We continued our share buyback program during the quarter. By the end of Q1, we have completed EUR 11 million of the EUR 15 million announced in December last year. We ended Q1 [indiscernible] of EUR 248 million with no debt on the balance sheet. This cash position provides us sufficient stability and flexibility.

Our first quarter performance confirms that we are on track for 2026. The revenue decline we saw in Q1, as mentioned before, was anticipated, and we managed to improve our profitability despite the lower revenue.

Looking ahead, we are reiterating our full year 2026 outlook. We expect group revenue of EUR 495 million to EUR 555 million in 2026, with Location Technology revenue of EUR 435 million to EUR 485 million and an operating margin around 3% for the full year.

As we indicated previously, some transitional headwinds, like the phaseout of certain customer programs, will weigh on this year's top line, but this impact is temporary. Therefore, we're continuing to invest in our Lane Model Maps, which are critical for a higher level of automated driving. As a result, free cash flow for 2026 is expected to be negative. As new automotive programs ramp up and newer products gain traction, we expect higher revenues combined with our ongoing cost discipline to drive a further step-up in operating margin in the long term.

And with that, we are ready to take your questions. Operator, please start the Q&A.

[Operator Instructions] We will take our first question. And the question comes from the line of Marc Hesselink from ING.

Yes. Thanks, Harold, for all the conversations over the years. I would take the opportunity to also look a little bit beyond for the long term on the question. I think when I started to cover TomTom, like more than a decade ago, one of the big promises was always autonomous driving, driving the long term.

I think if you're looking at the market today because of all the developments in AI, both on the side of producing the map, but also on using it and now maybe autonomous driving being much nearer than it has ever been. How do you see that next phase? Is that do you really see that we are now at the start of that next phase and we are going to see major differences for how the map is going to be used and the opportunities in the map and how important it is for autonomous driving? Just giving a little bit your long-term view on how this developed over the years and what's coming in the next few years?

Yes, Marc, thank you. Yes. So you're right, the self-driving technology has been a big promise for a very long time. And it has always until recently, I would say, failed to live up to the expectations. What we now witness is a new approach to self-driving technology, more based on AI and self-learning, which is much more promising. And at least in the laboratory, we can see sophisticated levels of self-driving technology being deployed in real cars.

So I think from a technology perspective, we are closer to solving the problem than ever before. What remains are the economics and also the regulatory framework, which will follow the technology. But I think from a technology perspective, we are motoring now literally. And we see that also in the demand for our products. Carmakers are now asking for higher levels of accuracy, more dynamic data, lane level information to enable self-driving technology and to provide a powerful additional data set next to the Edge processing that's placed in the car based on sensor information.

We have seen that coming back also in the orders and the -- so first of all, the interest in our products and the way we produce our products. But we've also seen it coming back in the order book. We had a big win last year with Volkswagen, as you know, which was a significant contract. And that is a product and a contract clearly aimed at higher levels of automation. To what level exactly, remains to be seen. But what we do see is higher degree of automation than we have seen before. And also that technology will enter into the mainstream sooner or later. And we've seen comparable questions and demands from other OEMs. Some of those demands have translated into contracts, but there's also a healthy pipeline in '26, '27 to go further than that.

Last thing, I think, is another trend that we're witnessing, is that carmakers want to have -- seem to prefer a unified map offering that is both suitable for navigation and display and map rendering and at the same time, can power the robot of the self-driving system. And the reason for that is that the self-driving system is also looking for a way to communicate with the driver what's happening. And when you do that on the same data set, it's technically an easier problem to solve. So we see a preference developing for united -- unified map that does both the traditional navigation and route planning, traffic information as well as being the sensor for the robot, for the self-driving part of the vehicle.

Okay. That is clear. Maybe as a follow-up, I think also there, the debate has been the same for a long period of time, which is, is a map layer needed for this autonomous driving, yes or no? And I think there is still a debate, at least reading through all kinds of articles on that one. I guess there's still the redundancy element of the map. Anything which you can add in the most recent conversations with your clients why a map would be required for functioning autonomous driving in the right way?

Yes. So it's a bit of a marketing story as well, I think, from vendors who are offering self-driving technology that is "mapless." We don't know of those systems that are mapless. They don't -- they do not exist other than in the laboratory and are not battle-hardened.

The -- I think one of -- the way to think about it is that it makes self-driving technology easier when you do have a map and more reliable and redundant. And the big challenge for software developers is not to fix the first 95% of accuracy. That is kind of a solved problem. The real problem is to solve for the last 5%. That is the hardest bit. And solving that last 5% is a whole lot easier if you have a reliable map underpinning your system than doing it without a map. And we see that also translated in our own interactions with customers, both OEMs, but also providers of self-driving systems that we are closely aligned with and talking to, to see how we can collectively come up with a system that is robust, reliable, but also, I have to say, affordable.

One of the reasons that the old HD Map never took off is cost. And cost was a problem because we were driving those roads ourselves with mapping vans. And that's, A, expensive; and B, does not provide for regular updates and a too long cycle time. With the new technology, the new approach, we have solved for both those problems, cost as well as cycle time and freshness.

So I think the market opportunity is wide open. And I think that battle will play over the next 2, 3 years, I think, for presence in that self-driving ecosystem.

Great. And then final question from my side is, leveraging that one also in the Enterprise segment, because I can imagine that the point you just mentioned, cost, freshness, cycle time, eventually also very important beyond automotive. I think at the Capital Markets Day, this point was quite promising, then it leveled off a bit. But maybe now with the progress we've made over the last 2 years, is it time that this one also can see some reignited growth?

I think the product challenges on the enterprise side are slightly different. There is some overlap, but the challenges are not the same. The Lane Model Maps is -- the development of that is predominantly driven by the requirements of carmakers and systems providers of automated driving systems. But I do expect overlap in the Enterprise world. And I think given its sufficient time, it will be harder to start distinguishing between what we call SD Map or -- and a lane-level map.

So those worlds will come together. There will be some overlap, but growth in the Enterprise sector will come from mostly initially from other initiatives that we are deploying. And I think we're getting on track also a little bit better on the Enterprise side, in filling that pipeline better than we have been able to do in 2025. So I think the initial signs on the Enter sides are encouraging.

Okay. Great. Thanks for all the conversations over the years.

Thank you. Thank you for covering us. It was a pleasure.

[Operator Instructions] We will take our next question. And the question comes from the line of Andrew Hayman from Independent Minds.

Yes, Harold, just maybe one clarification. You just mentioned that the old HD Maps never took off because of cost. Does that mean you've changed the pricing on the lane-level maps?

No, we have not necessarily changed the pricing. But the -- I think everybody understood that scaling that Edge-level HD Map, as we did it 10 years ago, was just too expensive and prohibitive. We have seen traction on the HD Map, and we still have customers driving with that HD Map. But everybody understands that if you want to improve the freshness and more importantly, if you want to improve the coverage, and when I say coverage, it's basically beyond motorways, there you end up in an unprofitable business case very, very quickly.

So it's not the unit price so much that I'm talking about, but it's more the capabilities of the product. Carmakers as well as systems providers are looking for coverage and accuracy on all roads, not just motorways. And motorways is only, what is it, 5% of the total road network, is motorways. The rest is all secondary and tertiary and local roads. And so if you want to do an accurate product on all roads, including freshness, then the old technology could never deliver that.

Okay. And then maybe if I look at the forecast for 2026, it's quite a large range for revenue overall. It's a span of EUR 60 million. And then for the Location Technology component, it's a span of EUR 50 million. What's the thought process behind that range? Is it just that there's so much uncertainty at the moment about car production levels?

Yes. It's a bit of that, of course. Currency plays a role as well. So for all the 3 revenue-generating units, there is a bell curve of expectations. We do think that the middle of both revenue ranges is the best guidance that we can give.

Okay. Okay. And then on the change in management, I mean, there's clearly considerable continuity because Mike has been with TomTom for a long time and Harold, you're moving up to the Supervisory Board. But any new CEO is going to want to make adjustments or emphasize different areas or components. Do you -- what changes do you see happening under Mike going forward?

Well, that's for Mike to talk through, and I'm sure he will do that in -- when it's his turn in 3 months from now and start to give you some of his ideas. What I want to say is this, I think we have -- we've gone through a major product transition over the last years that has led to a competitive product. Based on the product, there is market share to be gained. And I think we're well positioned. That needs to land, and there's all sort of things that can go wrong, obviously. But net-net, I think that is a -- that gives focus and clarity of what we need to do at least in the next 12 to 24 months. And I think that's good.

But of course, the world is changing rapidly. It's not only what we see geopolitically in terms of tariffs and in terms of energy and whatnot, but it's also the impact of AI potentially going forward that will have a significant effect on how we do things, how customers are consuming upward. I think the -- our anchor product, the map, is safe, and we will use AI to optimize processes and make it cheaper to maintain it. But that anchor product is good. And AI will have -- and the way we deploy AI going forward will -- and how the world evolves around AI, will affect the company like any other company in the world.

So those are the, I think, for the moment, the 2 big accesses where we need to follow progress going forward.

And then maybe on a smaller note. On enterprise, it's -- if you adjust for currency, it's growing, but it's not having the easiest time. And if we look back to you joining with OSM, the idea was that you get more detailed maps and that may open up more market opportunities or expand the potential market for your maps, maybe social, travel and food delivery. How is that going? I mean, are you making some progress, but the clients are quite small in those areas that you're getting through? And how do you see that progressing?

Well, yes, I think it's a good question, Andrew. I think -- and then 2025 was slightly disappointing in terms of order intake and traction around -- always in the Enterprise market. But I think we have turned the corner, and we see some early green shoots. I think that central promise of having a better map that's easier to maintain is valid also for the Enterprise world. And we are now pitching for contracts and opportunities that we could not win based on the old technology. So the addressable market is -- and I mean, there's tons of examples of that.

So it's slightly disappointing that it's taken longer. But I think the central idea of having a better map, more detail, more freshness, more efficient to maintain is still valid. And I hope that we will see that also being translated into Enterprise growth in 2026 and beyond.

We will take our next question. The next question comes from the line of Wim Gille from ABN AMRO-ODDO.

This is Wim from ABN ODDO. Apologies for the noise, but I'm in the train. So I hope you can hear me. First, on the rollout of the lane-level maps, you started off just in Germany. So can you give us a bit of clarity on where you are in the rollout in terms of number of countries? But also, are you still just on the motorways? Or are you basically doing all the other roads as well throughout Germany as well as the other countries that you're rolling out?

The second question would be on capitalized R&D. That seems to suggest you're accelerating the investments that you're doing in the rollout. So can you give us a bit more clarity on that decision? Is that based on the demand? Or are you basically just needing to invest more to get to the same results that you were looking for? And what is the reception of clients since you introduced this concept earlier last year?

Yes, Wim. Yes, you're coming through loud and clear. So no worries on that side. Yes. So the Lane Model product, our goal is to build it completely automated. So expanding coverage is just a matter of compute and electricity, but no other practical limitations on coverage and speed of production. That's where we want to end up. That's not where we are.

There is a certain level of fallout following those automated processes. And that means that manual labor and operator interaction, in some cases, is required to filter out inconsistencies to checks and so on and so forth. So -- and we are in a position now where we are producing, but we are also making investments to reduce that fallout in order to prevent manual labor and improve the speed of the process and the associated coverage.

The idea is that by the end of the year, we have a fully lane-level map, both for North America and for Europe. We're producing it now for parts of Germany, whilst improving the processes, improving the factory in the pipelines, if you like. And the aim is to reduce the amount of manual labor we need to produce those maps close to zero. It will probably never get to zero, but it needs to get close to zero because that gives us speed, flexibility and efficiency but also quality.

And what are clients saying about the products?

So people are excited that it's possible. We are producing a product that could not be produced before. They're excited that it has been developed with a view to serve security and safety critical applications. So it's an industry strength product. That's also how the quality systems are designed to make sure that we meet those standards. So yes, both carmakers and systems providers are excited that there is a product that can play an important role, and they're looking at progress with interest.

We will start doing test driving with integrated systems now or in the next couple of months or something like that where we get for the first time, real-time feedback on how the system, not the map, but the system with the map is behaving in practice and in real-life situations. So those are important milestones.

Yes. If I can add to that. Then you also had a question about CapEx. So in the cash flow statement, you see that line investment in intangible assets, that's indeed higher than what it was last year same quarter. I expect that to normalize between "below EUR 10 million" going forward. So it is more -- yes, I wouldn't call a one-off, but it's not a clear trend that it now will go up every quarter.

Very good. And if you are now participating in RFQs, specifically related to HD, I can suspect that most of the RFQs that you're participating in are now Edge driven and no longer [indiscernible]. But how is your product [indiscernible] up against the competition? So are you still producing HD Maps in the old way? And what does it do to your competitive pricing advantage? And which parties do you actually engage in these RFQs? I can only assume that here -- is there -- and in some cases, Google. But do you also see newcomers joining in these RFQs?

Sorry, Wim, I tried to understand your question. It was not entirely clear, to be honest, the first part in particular. Yes. So in terms of market position, I think we are currently leading in specs in ambition. Of course, we need to deliver all that goodness as well. And our internal target is by the end of this year to have significant coverage on both continents. And I think that will be a leading and it is a leading product both in terms of what it does and how it is produced, which is not a minor point actually. In this case, it really matters how you produce it because it tells you something about economics, quality, repeatability and so on and so forth. And there is significant interest, I think, from industry players, in what's going on. And so we feel good about that.

I think Google obviously is an important competitor, but Google has a tendency to leverage consumer-grade products for the automotive world. And this is not typically an area where they're focusing on.

And are you encountering any new competition in RFQ processes?

No, no, we do not. It depends how you define competition, but I think there's no one else that I know of that has an integrated approach to both navigation, self-driving, ADAS, all on one product stack.

And with respect to Enterprise, I do have a question on kind of the conversion and basically the acceleration that you are seeing at the moment. Can you give us a bit of feeling on kind of what types of, let's say, projects you are now converting or are close to converting? Are these still the smaller projects? Are we also now looking at the bigger clients and the ones that can really move the needle?

Yes. Yes, I think I wouldn't say acceleration. I think what I've said, I've used the word green shoots, some -- both contracts but also a pipeline that is building. A couple of areas where we see good traction, insurtech, defense. There are significant opportunities opening up, intelligence, public usage of our data, both traffic planning, intelligence. Those are the sectors where we see the order book and the pipeline really filling up. And some of those opportunities are significant as well, multiple millions per annum.

Thank you. And that leaves me with, yes, basically one last comment. So I would like to thank you for, I think, close to 80 earnings calls that we did together. No doubts.

This sounds like an awful lot, Wim.

It is.

This sounds like an awful lot. But thank you very much. It's been a privilege and a pleasure.

[Operator Instructions]

As there seem to be no additional questions, I want to thank you all for joining us today. And Heidi, you may now close the call.

Thank you. This concludes today's presentation. Thank you for your participation. You may now disconnect.

Good day, ladies and gentlemen, and welcome to TomTom's Fourth Quarter and Full Year 2025 Results Conference Call. [Operator Instructions] Please note that this conference is being recorded.

I would now like to turn over to your host for today's conference, Claudia Janssen from Investor Relations. You may begin.

Thank you. Good afternoon, everyone, and welcome to our conference call. In today's call, we will discuss the fourth quarter and full year 2025 operational highlights and financial results with CEO, Harold Goddijn; and CFO, Taco Titulaer. Harold will begin with an update on strategic developments. Taco will then provide further insight into our financial results, our Automotive backlog and our outlook. After their prepared remarks, we will open the line for your questions. As always, please note that safe harbor applies.

And with that, Harold, let me hand it over to you.

Yes. Thank you very much, Claudia, and good morning, good afternoon, everybody. 2025 was an important year for TomTom as our product strategy clearly matured and we gained commercial traction. We introduced several new products with our Lane Model Maps standing out as a major milestone. Orbis Lane Model Maps provide lane-level intelligence, including geometry and lane markings, but at a true urban scale. And by leveraging our AI-powered map factory, we can now produce lane accurate maps with exceptional efficiency and freshness, and this has been proven to be a differentiating capability.

A strong validation is that we secured a record amount of new business, and that includes a collaboration with CARIAD where TomTom Orbis Lane Model Maps were selected as a core component of the automated driving system supporting the Volkswagen Group brands. In Enterprise, Orbis Maps broadened and diversified our customer base. In the beginning of 2025, we announced a new cooperation with Esri, through which we provide maps, traffic data to support businesses and governments with location intelligence, addressing various use cases from maintaining critical infrastructure to analyzing traffic flows. And more recently, we deepened our global partnership with Uber, expanding our collaboration to enhance on-demand travel experiences worldwide.

Looking ahead to 2026, I'm confident that continued advancements in our product portfolio will further strengthen our commercial traction across both our Automotive and Enterprise business, supporting top line growth over time. We will continue to expand and enhance our product offering, and we will make it easier for developers and for businesses to access our data, which will support future growth. We see meaningful commercial opportunities emerging in automated driving and infotainment as well as in high potential verticals such as insurtech and state and local government. Thank you very much. This is my part of the presentation.

I'm handing over to Taco.

Thank you, Harold. I will cover our financial performance, the key trends we're seeing, an update on our Automotive backlog and our outlook. After which, we will take your questions. Automotive IFRS revenue for the fourth quarter amounted to EUR 77 million, down 3% year-on-year. Automotive operational revenue was 12% lower compared to Q4 last year. The Enterprise business delivered EUR 39 million, a 10% decline versus the same quarter last year. Approximately half of this decline is explained by a weaker U.S. dollar versus the euro year-on-year as around 3/4 of our Enterprise revenue are U.S. dollar-denominated.

The remainder of the decline reflects a continued phase out of a large customer, partly offset by a broadening of our customer base over the course of the year. Gross margin was 89% in the fourth quarter, a 2 percentage point improvement compared with Q4 2024, mainly driven by a lower proportion of hardware in our revenue mix. Operating expenses were EUR 110 million, a reduction of EUR 21 million compared with the same period last year, reflecting the combined effect of capitalizing development costs associated with our Lane Model Maps and disciplined cost management.

For the full year 2025, we recorded group revenue of EUR 555 million, 3% lower than in 2024. Automotive IFRS revenue was EUR 323 million, down 2% from last year due to lower car volumes at some customers and the phaseout of certain car lines, partly balanced by new model starting production. Operational revenue in Automotive dropped 1%, staying largely stable versus 2024. Our Enterprise revenue for the year was EUR 159 million, 2% lower year-on-year. For the full year, the picture is similar as in the quarter, normalized for the currency fluctuations. Enterprise revenue showed a marginal increase compared with last year.

For the full year, gross margin was 88%, an improvement compared with 2024. This continued shift away from consumer hardware structurally strengthened our gross margin from 85% in 2024 to 88% in 2025, and we expect it to move north of 90% in 2026. Operating expenses decreased to EUR 489 million, a EUR 19 million reduction, same as for the Q4 trend. This reduction was due to capitalization of our map investment, lower amortization charges and reduced personnel costs from the second half of 2025, partly offset by the reorganization charge booked in Q2 2025. Looking ahead, the quarterly OpEx run rate entering in 2026 will likely be a few minutes -- a few million euros higher than what we saw in Q4.

But for the year as a whole, we expect the total operating expenses to remain below 2025 in 2026. Free cash flow, excluding the cost for the reorganization we announced halfway in the year, EUR 19 million. This was an inflow of EUR 32 million compared with EUR 4 million outflow last year. Having covered our results, let's move on to the Automotive backlog. Our Automotive backlog at the end of the year reached EUR 2.4 billion, a net increase of EUR 300 million compared with the end of 2024. Our Automotive backlog represents the expected IFRS revenue from all awarded deals. Accordingly, the backlog decreases as revenue is recognized and increases when new deals are won.

Its value can also fluctuate when customers revise their vehicle production forecast and with ForEx revaluations. The increase in backlog this year was driven by a record level of new deals. Our book-to-bill ratio was well above 2 last year, partly offset by negative impact from ForEx revaluations, which has a more pronounced than usual effect on the backlog valuation. A large portion of the Automotive revenue we expect to report in 2026 and '27 is already covered by the backlog generated from prior year's order intake. The majority of the value from the 2025 order intake is expected to start being recognized from 2028 onwards.

From a product perspective, we see Automotive RFQs increasingly gravitating towards Lane Model Maps, the maps that enable autonomous driving functionality and support a growing range of advanced safety features. The products accounted for approximately half of last year's order intake, and we expect this [ should ] continue to grow. OEMs are clearly increasing their product and engineering focus in this area as Lane Model Maps enable both improved vehicle performance and meaningful differentiation. Our strong positioning in this area reflects a decade of sustained investment in these capabilities, and we're now seeing those investments translate into tangible commercial results.

An additional benefit is that securing Lane Model Maps deals opens the door to road model map awards for the navigation use cases, supporting further market share gains. Now let's move to the 2026 outlook. Looking ahead to 2026, our revenue will reflect the transition of some customers. However, this impact is temporary. 2026 group revenue is projected to be between EUR 495 million and EUR 555 million, with Location Technology contributing EUR 435 million to EUR 485 million. We expect our operating result to improve year-on-year, while free cash flow is expected to turn temporarily negative due to the sustained investment in our Lane Model Maps. Operating margin is expected to be around 3% of group revenue. A return to top line growth is foreseen in 2027.

Higher revenues combined with disciplined cost control are set to drive a further step-up in operating margin as well. To conclude, let me summarize our prepared remarks. We closed 2025 with a strong strategic momentum, marked by a record Automotive order intake and an expansion into automated driving. Despite modest top line declines driven by market conditions and customer transitions, EBIT and cash generation improved meaningfully. With an expanded EUR 2.4 billion Automotive backlog, new product launches and strengthening commercial partnerships, TomTom enters 2026 well positioned for a return to growth in 2027.

And with that, we are ready to take your questions. Please, operator, please start the Q&A session.

[Operator Instructions] And our question come from the line from Marc Hesselink from ING.

Yes. I have a couple of questions on the lane model. I think this is the new product versus the HD Maps that you previously had. But I think under the hood, a lot changed in the way you build your process, you build your map, how you can integrate with the client. Just if you can explain how this product currently looks like? And also how are your clients going to integrate it?

And if you can also talk about what is your competitive position there? Is this now something that is really unique for TomTom that none of the competition has something like this? And if you then compare it, there's always sometimes still the debate between for this kind of functionality, do you need a map, yes or no? What's the status there also with things like the redundancy of the safety features?

Yes, Marc, thank you. Yes. So the lane model is fundamentally different from a road model map because it is a representation of the actual road and all the lines on that road and the dividers and whatnot. So you get a replica encoded of what is the road surface, what the road surface looks like. And the problem with building that map is that it's always been very expensive and not -- didn't scale very well. But with new advances in technology and new data that are becoming available, we can now produce those maps to a high degree of automation, not completely automated, but there's a high degree of automation is possible now.

And that means that it's becoming economically viable to do this on all roads, not just the motorways. And it also means that you have a process for upgrading and change detection. So you can build maps that are fresher. All those capabilities are critical for self-driving and automated driving. We see that those maps are used in those systems as not only as backup, but also as a sensor. The challenge for self-driving technologies is to reduce the number of interventions of the driver of the vehicle and maps data play a very critical role in reaching that objective.

Yes. And the competition at this stage?

Well, so we don't have full visibility, but we believe that the method that we are deploying is novel, differentiating, leads to better results, scales better than what our competitors are capable of producing.

Okay. And if we look at the client side, you obviously have a big success with the CARIAD. But what about the discussions with other OEMs? Is this something that you -- I'm sorry.

Yes, go on, Marc.

Yes, I said -- and I wanted to add to -- do you speak to many other clients, including also the Chinese OEMs?

Yes. So the interest is coming from a broad range of car brands. People of carmakers want this. They can see the value of having that dataset available for the self-driving function, and that is broadly shared amongst all our customers and also potentially new customers. So we see a profound deep interest in understanding what's going on and how this technology can help them to make those cars and bring the level of automation to the next level.

And next to that, we also see interest from software developers who are developing the self-driving software stack. There are a number of independent software developers who are doing this, but some based in -- mostly based in China. And they also show strong interest in understanding what this technology can bring and how it can help them to mature their own technology stack.

[Operator Instructions].

Let me -- if there's no -- I see -- if there's no further questions, let me give the opportunity to some of the analysts if they want to take the questions. If not -- no. If there's no additional questions, I want to thank you all for joining us today. And operator, you may now close the call.

There is...

Oh, sorry. Andrew, sorry.

I have a question that's come through now. So we are now going to take the next question from Andrew Hayman from Independent Minds.

Yes. Could you maybe give some guidance to how negative you think the free cash flow will be in 2026?

Yes. Thank you, Andrew. So 2 things I want to say about that. One is -- the second thing is to answer your question. But the first thing is that we introduced new guidance metrics in 2020. So we gave guidance on the top line and the bottom line. The top line was the group revenue and the Location Technology revenue. And the bottom line, we chose free cash flow because free cash flow at that time was the best tracker of our profitability. That had to do with the disparity -- the difference between operating and reported revenue in Automotive and the big delta between amortization and CapEx that we saw in the OpEx line resulting from the acquisition of Tele Atlas.

Now both effects are kind of gone. So you also saw last year that reported revenue and operational revenue in Automotive is at parity. They're kind of almost the same. And also, we have -- we don't have any amortization left that's related to the Tele Atlas acquisition. So we want to normalize our guidance towards a revenue and an EBIT forecast. And that said, as we also have -- and then coming into your second or your primary question, the fact that Automotive is declining next year temporarily and we sustain our investment at the same level as we had last year, we will see free cash flow being negative in this year.

How large it will be, I don't know exactly, but I expect it will be above EUR 10 million, but not much more than that. And then if our revenue, our top line is recovering in 2027, I expect that free cash flow will be positive again as of 2027 onwards. But an official guidance will follow in 12 months from now about that. So we'll continue to provide direction about free cash flow, but the primary guider or primary KPI for profitability will be EBIT.

Okay. And then in terms of the bookings that came in, how much of that is new customers? And how much is just more business from existing customers? And then maybe just tied in with that, how does the funnel of business look for 2026? Is there going to be -- is it a bit quieter after so much activity in 2025?

Well, yes, so if you look at order intake, you can make a 2x2 matrix. In the horizontal, you say existing customers and new customers. On the vertical, you say lane model or road model, where lane model is the automated driving and safety use cases and where road model is more for the driver itself to navigate from A to B. What I already mentioned in my prepared remarks is that what we've seen is that if you break down the order intake of last year that roughly half of that order intake is related to lane model. And that percentage will only grow further.

So also for 2026, we think that the proportion of lane model RFQs and potential wins will be tilted towards lane and not so much road. Road models can be a tag-along deal. Increasingly, OEMs want to focus on securing the right quality and the right vendor of lane models. And also that gives us opportunities to also secure extra deals in road modeling. The majority -- yes, CARIAD is an existing customer, of course, because we already do software with them. So in that sense, the majority of the order intake was with existing customers.

But I want to add to [Audio Gap] first time that we deliver map data at scale to the VW Group.

Yes, that's different. But before it was navigation software and traffic, et cetera, but now it is also including map data.

Okay. And how does the funnel of potential sales look for this year? Because it looks like -- I mean...

There's a broad and deep book of opportunities out there, not dissimilar from 2025. So the activity is really -- is there from what we can see now. But what we also have seen in 2025 is that timing is very difficult to predict also because of ambiguity in product planning in all sorts of market conditions. But I think the way we look at it now, there is substantial opportunity available again in 2026 for further building of the backlog. And there are also opportunities available to us for extending and growing our market share.

And the questions come from the line of Marc Hesselink from ING.

A follow-up. One on the Enterprise segment. I think in previous calls, we've discussed a lot about the momentum for the small clients being quite good. But then for the bigger, longer sales cycles, is that still ongoing? Are you still talking to these bigger potential clients? And would we expect something beyond '26 in the '27 period? Is that likely?

I don't think there's -- we don't anticipate a big shift in market opportunities in 2026. No extraordinary, but we think that the momentum we have to an extent in the long tail opportunities, that will continue throughout 2026. The composition -- yes, so there's a lot to go after in -- also in the Enterprise sector.

Okay. And -- but the big clients, they sort of stick to their own products or...

Well, we have a good market share with the big tech companies already. There are not that many of them, but our market share there and our representation with big tech is significant. So the growth and the expansion need to come from companies below that tier. There's a lot of them in the EUR 10 million kind of category. There are a lot of them in the -- between EUR 1 million and EUR 10 million category that are available to us to win.

Okay. Okay. That's clear. And then the second follow-up was on -- you mentioned also for next [ year, so '27 ] to be cautious on the cost side. And I just want to understand that a bit because I think that you say you're moving towards the more automated process. It's almost now already almost fully automated. Is that something that you can still take a bit of steps there to further automate it and at that stage, decrease the cost a bit?

Yes. Well, we -- so there's a number of things that we can achieve through -- on the cost side. I think the most important one is that our product portfolio is maturing and coming together. And we're more product-driven than in the past. And that means that we can do things more effectively, better at higher quality and we can leverage that software much better than we've ever been able to do in the past. We see also opportunities to further leverage the power of AI, especially in the engineering side. We're making some meaningful progress in that area.

So the combination of a simpler product portfolio at a higher quality that is reaching completeness now after a long period of transition, those are all indicators that we can do things more faster at higher quality, but also with -- allow us also to keep a lid on the cost and not let that grow. There will be additional costs in maturing lane level product, as Taco already indicated. But all in all, I think we are in a good position not to let the cost and the OpEx run away from us, but rather contain it and manage it carefully without that giving strong limitation on our ability to get things done.

Okay. With that, I want to thank you all for joining us today. And operator, now you can really close the call. Thank you.

Thank you. This concludes today's presentation. Thank you for participating. You may now disconnect.

Good day, ladies and gentlemen. Welcome to TomTom's Third Quarter 2025 Results Conference Call. [Operator Instructions]

Please note that this conference is being recorded. I will now turn the call over to your host for today's conference, Claudia Janssen, Group Controller, Head of Investor Relations. You may begin.

Thank you, Mel, and good afternoon, everyone, and welcome to our conference call. In today's call, we will discuss the third quarter 2025 operational highlights and financial results with CEO, Harold Goddijn; and CFO, Taco Titulaer. Harold will begin with an update on strategic developments. Taco will then provide an overview of financial performance and outlook. After their prepared remarks, we will open the line for your questions. As always, please note that safe harbor applies.

And with that, Harold, let me pass it over to you.

Well, thank you very much, Claudia, and good afternoon, everyone. I appreciate you joining us today. I'll give you a short strategic and operational update for the third quarter, and then I hand over to Taco for the financials.

So this quarter, we launched our next-generation Automotive Navigation Application, which is a ready-to-use but also configurable and integrated solutions for OEMs that enables quick deployment of high-quality navigation systems. The product sets a new benchmark for user experience, quality and flexibility in the industry, and we see the products generating strong interest. The release is an important milestone in our quest to deliver a standardized product portfolio.

The automotive market remains dynamic, but we are encouraged by several promising developments. We announced the expansion of our partnership with Hyundai, and we secured a multiyear agreement to provide real-time traffic and speed camera services for the vehicles across Europe, but also promising discussions around automated driving use cases and our continued investment in mapping and next-generation solution positions us well to support our partners as the industry evolves. We're encouraged by the progress we're making, and we remain confident in our long-term prospect within the automotive sector.

Enterprise is progressing, though adoption is building more gradually with U.S. dollar currency movements adding some pressure. We continue adding new customers and broadening the customer base. We will make it easier for developers and for businesses to access our data, and this will be a key driver of future growth.

Taco will now walk you through the financials. So with that, I hand it over to you, Taco. Thank you.

Thank you, Harold. Before discussing our outlook, I'll walk you through our financial results and highlight a few key developments. After my prepared remarks, we will open the line for your questions.

Group revenue for the third quarter was EUR 137 million from EUR 141 million in the same period last year, and Location Technology revenue totaled EUR 118 million. Let me briefly touch on performance business by business, starting with Automotive.

Automotive operational revenue saw a strong year-on-year increase of 22% to EUR 85 million. This increase can be attributed to multiple factors: the ramp-up of new vehicle lines we supply, a recovery in automotive production volumes especially within the United States, and certain royalty reports related to previous periods which amounted to roughly EUR 5 million.

Automotive IFRS revenue came in at EUR 80 million, a 2% increase compared with the same period last year. The difference between the operational reported trend is partly due to royalty reports from prior periods that will be recognized later. And like mentioned in previous quarter already on a year-to-year basis, the trends of Automotive IFRS and operational revenue are much more aligned as IFRS revenue typically shows a more stable pattern while operational revenues can be influenced by periodic swings that are neutralized when looking at longer periods of time.

Enterprise revenue was EUR 39 million adjusted for constant currency. We maintained stable revenue quarter-on-quarter.

We realized a strong gross margin of 89%, up from 87% last year. The year-on-year increase in gross margin primarily reflects a greater share of higher margin content and software revenue within our overall revenue mix.

Our operating expenses were EUR 114 million, reflecting a marked year-on-year decrease. This decrease was mainly driven by strong cost discipline, the capitalization of our mapping development costs and lower amortization charges.

Free cash flow was an inflow of EUR 17 million in the quarter compared with EUR 15 million last year. For completeness, the EUR 17 million, excluding EUR 14 million restructuring charges paid during the quarter. We expect the majority of the remaining EUR 11 million we provided for will be paid out in the next 2 quarters.

Our net cash position at the quarter end was EUR 267 million, equal to the end of last quarter and up from EUR 264 million at the end of 2024.

Having covered our results, let me touch on our outlook. Revenue performance this year so far was solid. Accordingly, we are increasing our expectations. We now forecast that both full year group revenue and Location Technology revenue will approach the upper end of our previously communicated guidance range. Free cash flow is expected at around 5% of group revenue. Our business fundamentals are strong. We are beginning to see how the stronger emphasis on our product-led approach is positioning us well for long-term growth.

And with that, we are now ready to take your questions. Mel, please start the Q&A session.

[Operator Instructions] Our first question comes from the line of Marc Hesselink from ING.

Yes. I have two please. First, on Automotive, quite good momentum, especially if you take into account the weakness in auto end markets. I understand that there's a difference between the auto end markets and the production levels. But it also seems that you're gaining some share there, and you also point out the automated driving opportunity.

Can you maybe point towards the building blocks that we have discussed before, as in how much is share gains part of the building blocks? How much is adoption rates because of maybe automotive driving functions? Maybe if you can talk about these separate parts, please.

Yes. So I think it's a bit of a mix, to be honest. So in the third quarter, we saw indeed ramp-up of certain car lines that included existing customers, but also some new customers. But there were also some ramp-downs of customer contracts. So I think the increase that you are experiencing is probably mostly attributed to the adoption rate. So the overall car market is stable at best. Market shares, we do gain here and there, but I don't think that is reflected in Q3 yields. The main driver for a little bit stronger performance than the car market overall is -- we need to look towards adoption rates.

For the AV, so you have the EV opportunity, and of course, that is a further increase in adoption rates. You also have AV, so automated vehicles. I think that is not significant in today's P&L results, but it is a huge part of the order intake, what we see coming in.

Okay. So you're already seeing those orders coming in? I mean that...

Yes, for sure. But that is probably 2, 3 years out before that will contribute to our P&L.

Okay, okay. Clear. Then Enterprise. I think you had very strong momentum last year. This year, if you try to -- like-for-like currency, it's still a bit slower. I would have expected with the initial ramp-up with Orbis that you would gradually see this picking up. And then also maybe what you said before, maybe some of the bigger clients, which have longer lead times coming through. Is that still what you expect? And why is it a bit slower than the initial expectations?

Yes, it's a bit slower. You're right, and it's also a bit slower than I had hoped. There's a lot going on. It's not that there's no activity. And I think we will continue to grow the Enterprise segment. We see in the mix 2 things. We see a decline of one larger customer. I think that's well documented. That's been filled in by a number of smaller customers. So the overall customer base is growing. There's quite a lot in the pipeline, and that will probably fall either end of this year or beginning of next year.

But if we want to enable the next generation of growth, also things need to happen on the product portfolio and the access to our products needs to be made easier. That's all planned for the beginning of next year. And we are confident that the Enterprise segment will continue to grow in the midterm.

Okay. And then the final question I have is on the gross margin. I think it's clearly a good mix effect, but also more -- less customization structurally going forward. Is it fair to assume that eventually, Location Technology will be almost like 100% gross margin business, given that you're planning to sell the same product to all the clients? Or is that -- or am I missing something there?

Well, there is -- in some cases, there are license costs, but they are not massive. That's a small percentage of sales revenue. But what you will see increasingly is the cost to serve when it's concerned online solutions. So there's a cloud cost element coming in, and that will grow over time, not massively, but it will grow.

But you're right that it will start with the 9 very soon, starting next year probably. So it will continue to grow, but it will not reach the 100%.

We'll now move on to our next question. Our next question comes from the line of Robert Vink from Kepler Cheuvreux.

I have a question about the outlook. Encouraging that TomTom improves its outlook to the upper end of the previously guided range. I'll be interested to hear why you've decided to kind of maintain the upper range of your revenue outlook as you are approaching it? And why you have not decided to maybe increase the upper limit of the guided revenue range for fiscal year '25?

Maybe second question, yes, bigger picture question on self-driving. How do you see your automotive customers using TomTom's HD Maps for self-driving type of applications? Of course, we see the emergence of players like Wayve, which are pursuing a more autonomous learning-based type of approach, maybe a different way of interacting with maps. Is that maybe transforming how these automotive -- autonomous players are interacting with your map technology? Do you maybe see more of an emphasis on certain functionalities over others? Yes. So maybe how is that picture of autonomous driving and how that interacts with your technology? How is it evolving from your perspective?

Yes. Let me touch on your first question and then hand it over to Harold for your second question. Yes, the guidance, if you look at the 3 revenue-generating units, there will be some sequential improvement expected both from Automotive and Enterprise, although for both cases, it will be modest. And then the last one, consumer will decline as it is doing for the last period. So if you add it all up, then I think we are still within the provided range, and that's also how we guided.

Yes. So let me handle the self-driving part of business. So the -- we see carmakers now fully preparing for next generation of level of self-driving. We expect that to come to market in '26, '27, a higher level of autonomy, and the map plays in all the use cases that we know, provides 2 different functions. First, it's providing an extra data source to the self-driving robots, and that means that you can achieve a higher degree of reliability, less interference of the driver. So an important measure is human interference per kilometer or per 1,000 kilometers. With a map, you can improve that number. The map becomes a safety device as much as an active input into the self-driving behavior.

And the second important part where the map is used is to explain to the driver what the robot is doing and why it's doing it, what it is seeing around it, why it makes a certain decision. And that is an important input for the driver to understand what's happening, and that provides comfort but also safety as well.

So it's for those 2 functions that the map are used. And we see interest for the use of that map across the range, across the whole ecosystem. So both from the OEMs, but also from the software makers across -- whether they're based in the U.S. or in Europe or in China, all builders of self-driving software are looking to use a map in one way or another, with the notable exception, as you said, of Wayve, that's a U.K. outfit. Everybody else seems to be relying on maps to give that extra level of security and safety and predictability.

Yes. And I think on top of that, we have quite an innovative approach to building those maps. We're coming out of a period of HD thinking that didn't quite work. It was too expensive, didn't scale. But with new technologies and new data available to us, we can now construct those maps at scale, at quality and add detail for the whole road network. And that's a different way of looking at those maps as well. They become more economic to build and to maintain and their application is over a much wider set of use cases. So technology is really progressing quickly here.

Yes. Maybe a different question here on regions in general across the Location Technologies segment. Of course, with Orbis Maps, you have kind of improved your offering globally, particularly in some emerging markets. And I think many of your customers are global. But in some cases, you only service them in certain regions like Europe or North America. Do you maybe see some momentum maybe in your conversations to service customers more globally? Is that something which is happening? Or is that more, yes, still early stage?

Well, I think -- so the quality of our map is really starting to shine across 3 dimensions. So coverage, detail, freshness. We put a lot of effort in that. And now we also start to get the feedback from the market that are -- that we have superior maps product. And we hear that from customers who are testing those maps and doing independent verification in order to make buying decisions for the future.

So we will -- I think that strategy is working and we start to get some recognition for that as well, and that gives us confidence for order intake, midterm revenue growth in the Automotive segment as well.

[Operator Instructions] We'll now move on to our next question. Our next question comes from the line of Wim Gille from ABN AMRO ODDO BHF.

Let me see what I have left. I think the first question would be on an accounting one. You started to capitalize some of the R&D and intangibles earlier this year, which is essentially related to a change in your kind of map philosophy with HD Maps becoming de facto standard and the standard definition map derivative.

And the question here is, when will we actually see a tangible increase in HD revenues in your financials and your revenues? And is this also the moment when you will start to amortize on the capitalized R&D again? So is this something we need to build in for 2026 already? Or is it more a 2027 story?

The second question I would have is more of a commercial one on the Enterprise side. Obviously, the dollar had quite a bit of a negative impact. So underlying, you're close to being kind of neutral, flat, whatever, still having -- not having any organic growth in the Enterprise segment is quite disappointing. So I would like to have a bit more feeling about the commercial momentum here. So what's the churn amongst clients, if that is an issue at all, which type of new clients are you adding at the moment? Is it still mainly smaller OSM users? Or are you already converting Google and HERE users? So where are we on that spectrum? What's the momentum that you have with Orbis Maps in the government vertical, which is the transaction you had last year with the Australian government? And when can we see kind of more conversions for basically larger customers that are -- have been testing the product for a long time now? Obviously, larger customers have way longer sales cycles, but are we getting any closer to announcing some bigger deals? That's it.

Yes. Let me take the first question, and then I'll hand over to Harold for the second question. On capitalization, on this new way of AV mapping of automated driving, that indeed started this year. I expect revenue to start coming in as of H2 2027. So that's still 2 years away, significant revenue that is 2028, but the amortization will start towards the end of 2027.

Okay, Wim. And then your question on the Enterprise side. So churn, I think there is a well-documented case with a large customer that is building off the partnership. They have built their own map in the meantime. We're filling that gap, but we're not outgrowing it. So the customer base is broadening. We have more customers with smaller customers. And net-net, it's flatlining.

There is a lot of movement, though, a lot of opportunity. One sector that stands out is government and intelligence sector. We have quite a bit of RFQs and RFIs outstanding there, and we feel that we're well placed to win an agreement, at least a proportion of those opportunities. And there are also larger opportunities as well. So the government and intelligence potential contracts are significant revenue opportunities.

So I'm not too worried. It is a bit disappointing that we haven't been able to show growth in this quarter. But I feel that we are strengthening our position, that we are broadening our customer base and that we will continue to grow this segment over time.

And what about the kind of current customers that you are onboarding? I assume, looking at the numbers, that we're still talking about smaller OSM users.

Well, it's not only smaller OSM users, it's real business and real customers in insurtech and fleet logistics. And traffic is doing well. So we have launched a number of new traffic products and traffic analytics. For us, we are a market leader in that segment that seems to be accelerating. So there's quite a lot of good underlying developments going on, but it's a little bit obscured by the decrease of revenue coming from a particular one customer.

And that large customer that started building their own maps in 2012, I think it was -- '15, how big is that customer still in your revenue base? Are we talking about a few percentage points?

As you know, Wim, we don't quantify that. But it will remain to contribute to our revenue up until H2 2026.

[Operator Instructions] We'll now move on to our next question. Our next question comes from the line of Andrew Hayman from Independent Minds.

Just on -- you've linked quite well with OpenStreetMap for Orbis, but I was just wondering, do you see open source vehicle routing software is becoming a viable competitor to you?

The routing software?

Yes, open source routing software. Is it making any headway whatsoever?

Well, I mean it's often used as a starting point for companies who want to do their own routing algorithm. They start with an open source program and then tune it to their needs. So it is a factor in the market. But none of those initiatives will -- have been able to match the reliability and efficiency of the real commercial route plans and routing algorithms from us or from Google or from Apple. That's a different level of sophistication.

Okay. And then maybe just another question. When you were launching the new auto navigation app, I was looking at your promotional videos and there was a big emphasis on how quick it could be rolled out, for example, from the drawing board to the dashboard in 12 weeks. I mean how does that compare to your competitors? And is that one of the key selling points of it?

Well, I think the key selling point is the UI and the overall user experience is the key selling point. It's a high-quality program with good search, good EV routing, routing, great map display, that's a unique selling point. But to also meet the requirements for cost-effective integration, we built it up in such a way that, that's possible. And that's not the main segment of the market. But if you want, you can get it up and running in 12 weeks. And that tells you something about the quality and the completeness of that product.

If you want to go beyond that, there's also a lot of possibilities to do that and tune it completely to your own requirements, but the fact that it is a standard but also configurable application is in itself an important message for the market. And certainly, if you look at the history of those programs, they have always been long and expensive and ultimately disappointing in what they offer the end user. And with this, we give a clear signal to the market, we -- it's possible to break that doom loop of high-cost long development cycles and mediocre products.

We'll now move on to our next question. We have a follow-up question from the line of Wim Gille from ABN AMRO ODDO BHF.

Yes, a follow-up question indeed related to Automotive and some of the commercial momentum we see there. In the past, you always indicated that 2025 was a year where there was quite an active year with regards to RFPs and what have you. So there were a lot of contract renewals in the market. How are you feeling about that today? I'm acutely aware that you will be giving the new order book numbers next quarter. But can you give us a bit of a sense on the direction here? How are you feeling about win rates? And how are you feeling about that big opportunity for RFPs in the market? Did they materialize or are OEMs pushing them out to 2026?

Yes. So I think we're well positioned. I think it is indeed -- it's going to be a big year, I think, 2025 in terms of total opportunity. The year is not over, and it's easy for those things to slip over into January. And the direction of travel is quite clear. Carmakers have postponed decisions for quite a while. I feel they can no longer do that, need to act even in certain times. We see that happening. And as a result, the quoting and the RFI, RFQ activity has gone up. I think in many cases, we are very well positioned to get a big chunk of those available opportunities in our way.

So would you say, based on kind of the numbers and the data that you -- and the win rates that you see today that after this round, your market share will go up or go down?

It's a bit early, and there's always a delay effect, of course, of winning and losing and whatnot. It can take up to 3, 4 years before you start seeing the actual market shares in the market changing. We'll give you, I think, a better feel in February when we give an outlook and the order intake number for 2025, with a bit of a feel of how that will play out over the coming years.

But it is -- to add to that, it's a mix of renewals. In your question, you spoke about renewals, but it is a mix of renewals and new opportunities.

Yes. So this is both renewals and market share gains that we are after, obviously.

Okay. As there seems to be no additional questions, I want to thank you all for joining us today. Operator, you may now close the call.

Thank you. This concludes today's presentation. Thank you for participating. You may now disconnect.